Nail salons have particular challenges that other types of businesses might not face when setting up a financial statement --- primarily because a salon's revenue streams and expenses are more fragmented. For example, nail salons often rent out stalls to individual technicians, almost like a bunch of franchises in a single building. However, with attention to detail and careful recordkeeping, you may set up a financial statement on a nail salon. The financial statement consists of at least three documents: a balance sheet, income and expense statement and cash flow report. The statement is easiest to prepare on a computer equipped with a spreadsheet or word processing program.

Open a new spreadsheet or document on your computer and create three pages --- one each for an income and expense statement, balance sheet and cash flow report. Title the pages with the name and address of the nail salon and the date, and make sure you consistently save your work throughout the process.

Create two columns in your "Income and Expenses Statement." In the left column, list all sources of income your nail salon generates by category. For example, if you sell nail care products, list general types of products --- e.g., lotions, polish, buffers --- beneath this category, along with an estimated dollar amount. If your salon rents booths to nail technicians, note the yearly rent for each stall and any additional fees the technicians pay to the salon. Otherwise, tally client receipts. Total all of the amounts in this column to obtain your overall income.

Type in all of your salon's estimated expenses in the right-side column. Include rent on your building if applicable, utilities, inventory costs --- not only for products you sell, but also products used to provide nail care services to clients --- insurance, taxes and employee salaries, if applicable. Calculate your total expenses, including taxes and without taxes. Subtract these numbers from your total income to determine your net and gross profits, respectively.

Set up the balance sheet by first listing all of the assets your nail salon possesses. This should include any real estate you own outright, your salon equipment and existing inventory, and the estimated worth of your rental stalls, if applicable. Although these might currently be rented by nail techs, if they were to become vacant, it's reasonable to assume they could be rented for the same fee --- categorizing them as an asset.

List any liabilities below your salon's assets. Liabilities are items such as rent, a loan or mortgage, or any other monies you owe, including lines of credit extended to you by banks or nail product manufacturers or vendors. Write a brief statement below the liabilities that details the dollar amount that would be left over if your nail salon sold all of its assets and then paid off the money you owe.

Prepare your cash flow report by detailing exactly what cash income you have coming in for the current fiscal period, as well as what cash you have going out. Although this report is similar to the income and expense statement you created, which dealt primarily with yearly estimates, think of this more like a bank statement, noting every deposit and purchase made during the reporting time to come up with a current report of the cash your salon currently has on hand. For example, you may have listed the yearly rent for the four technician booths that are available, but you may currently only have three rented.